In the area of stock investments, there is a school (“behavioural finance”) that studies the psychological components of investor behaviour. It is an approach that puts the feelings of market players centre stage, and studies them for clues that would explain price movements at the stock exchange. Here is one of the findings of this research school: People’s behaviour on the stock market is anything but rational. Their cognitive and decision-making faculties are impaired by greed, anxiety or hubris.

Arguably, you could say as much about the real estate market. Berlin’s real estate market is a perfect illustration of such behaviour. Investors feel more secure when doing what others do too. To be sure, chances are they may be right. No one shopping for property in Prenzlauer Berg or Mitte some years ago has anything to regret. Then as now, these are sound locations with a bright outlook.

Good locations inspire a feeling of security as much as the acquisition of premium property does. As often as not, investors let themselves be guided by past price hikes. If prices have been soaring, people subconsciously assume that the trend is here to stay. Conversely, investors will be sceptical about locations where prices have for some reason stagnated or even softened over time.

I vividly remember a time when people were appalled by the idea of investing in Neukölln or Wedding, for instance. For obvious reasons, these boroughs had a bad reputation – unlike Charlottenburg or Prenzlauer Berg, for example. But this is precisely where market psychology comes up against its limits: Investors tend to project historic developments forward, and to steer clear of investments that generate scant interest among other players. The thing is, these investments are often more affordable than the popular choices.

The best way to make money is to bet on unpopular themes early on. The latest figures by Jones Lang LaSalle suggest as much. They report that prices for existing apartments in Berlin have gone up by 18.3 percent last year. The price hikes were particularly steep in – wait for it – formerly highly unpopular locations like Neukölln (32 percent) and Treptow-Köpenick.

Similarly, the latest market report by CB Richard Ellis and GSW should give all those people pause who avoided sub-prime locations. The median square metre price quoted by sellers of apartment blocks rose by 17.4 percent between 2011 and 2012. Growth was particularly brisk in the lower market segment, meaning among the most affordable ten percent of the multi-unit housing market. Here, the quoted prices rose by no less than 56 percent. For the sake of comparison: The price median in the top ten percent of the market rose by only seven percent per square metre.

For real estate and equities, it is equally safe to say: Taking a closer look at supposedly unappealing and unpopular assets early in the game will often be rewarded by profit opportunities clearly superior to the performance of investments that hold the majority of market players in thrall.